The escalating price of crude oil in the international market has prompted the Ethiopian government to consider the utilization of biofuel.

As Ethiopia is not an oil producing country, it is completely dependent on imports. The country, on average, spends 8.6 billion birr every year on petroleum and this consumes 87 percent of the country's annual income. Various companies have been prospecting for oil in Ethiopia. "We should not only search for oil deep in the ground. We have to be able to use the oil that can be obtained from plants," says Alemayehu Tegenu, Minister of Mines and Energy.

Bio-fuel can be obtained from plants and animal fat. It can be produced from plants such as jatropha, castor seed and palm tree. Ethanol is produced from sugarcane. It can also be produced from molasses, the biproduct of sugar, corn, sweet potato and barely. Bio-fuel can be blended with petroleum products.

With the view to start consuming bio-fuel, the Ministry of Mines and Energy (MME) has prepared the development and utilization of bio-fuel strategy. The strategic document was approved by the Council of Ministers last September. The strategic document guides the utilization of bio-fuel by way of producing ethanol from sugar cane and extracting bio diesel from oil seed plants like jatropha, castor seed and palm trees.

Ethiopia has 700,000 hectares of land suitable to develop sugar plantation. The existing sugar factories - Fincha, Wonji - Shoa and Metehara - have a combined annual production capacity of 2.8 million quintals of sugar. So far, Fincha is the only sugar factory that produces ethanol. The factory has the capacity to produce eight million liters of ethanol per year.

Wonji-Shoa and Metehara together yield 64,000 tonnes of molasses. Molasses, which also used to produce liquors, have been exported to Italy and other European countries.

The government is building the third state-owned sugar factory, Tenaha, in the Afar regional state at a cost of eight billion birr. The project will develop over 64,000 tonnes of molasses. With the completion of the fourth sugar factory in 2012/2013, 128.1 million liters of ethanol will be produced. If all the potential suitable land for sugar plantation is utilized, the country would be able to produce one billion liters of ethanol; that is seven times more than the annual fossil oil energy consumption of Ethiopia.

For the production of oil for bio-fuel, Ethiopia has 23.3 million hectares of land in Oromia, Benishangul Gumuz, Gambella, Somali, Amhara Southern Nations, and Nationalities and Peoples Region (SNNPR) Tigray and Afar Regional states. Oromia has the largest land suitable for bio-fuel development 17.2 million hetares. So far, more than 15 companies have been registered to produce oil for bio-fuel and five of then have gone operational.

The bio-fuel development and utilization strategic document aims at promoting the sector. It encourages private companies to invest in bio-fuel development projects. The strategic document proposes to assist companies engaged in bio-fuel development project in securing loans. It promotes the importation of Flex Fuel Vehicles (FFV).

Melis Teka, acting head of the energy department with the Ministry of Mines and Energy, said that the government has given due attention to bio-fuel development. Melis said the government will soon introduce a blended fuel. The blended fuel will consist of 95 percent gasoline and five percent ethanol produced in Fincha sugar factory. The proportion of ethanol will be increased to ten percent. "We can use the blended fuel comprising up to twenty percent ethanol to run the exiting cars without making any modifications on the engines," Melis said. "And there are especially designed cars which can consume 100 percent ethanol," he added. The government is preparing an incentive package for investors who engage in bio-fuel development projects and on the importation and production of FFVs.

A study is under way to be concluded as to how the incentive package would be proposed to create encouraging environment for those developers to invest in the sector. In order to expand the use of bio-fuel in Ethiopia, FFVs would be imported by way of encouraging importers through some forms of incentives. Granting land suitable for the development of bio-fuel energy in various sections of the country free from taxes or with lowest possible cost of leasing as well as on long-term basis are some of the incentive packages to encourage more investments in the sector. Jatropha grows in dry climate condition that should be below 2,000 mm rainfall and the yield would be 1000 kg per hectare. Where the rainfalls range from 900 to 1,200 mm, jatropha would yield 5,000 kg per hectare.

Jatropha and castor seeds in Ethiopia are estimated to cost from 0.45 to 0.75 dollars per liter. However, in Germany, a liter costs 1.3 dollars. The bio-fuel development and utilization strategic document includes foreign market beyond the domestic demand and the government hopes to export bio-fuel after satisfying the local demand. "We anticipate to eventually export bio-fuel and this is something that can be achieved," says Melis.

The government had a plan to launch blended fuel in October this year. However, the plan failed to materialize for various reasons. "But we will definitely start the use of blended fuel this year," Melis said.